New England town converts hospital to condos

Part 2: Condo craze: Flippers, converters, first-time buyers grab a slice
By: Janis Mara: Inman News
Editor's note: The condo market is on fire across the country, with prices appreciating faster than single-family homes in some cases. Buyers are scrambling to be the first in line, and amateur real estate investing is akin to sports and hobbies in the hottest markets. In this three-part series, we examine the trend from the trenches, catching up with part-time investors and first-time buyers, along with an example of the type of unique conversion projects taking place. (See Part 1: Property flipping is sport in some markets.)

In tiny Adams, Mass., developers are converting a former hospital into condominiums, in a sign that the national condo conversion craze is hitting New England.

Halfway through construction, 11 of the 16 units already have sold, according to Dave Carver, managing partner of Scarafoni Associates of North Adams. Scarafoni is the real estate management and development company converting the hospital.

"This is the first condo project in the town," said Carver. Adams, which has 8,000 residents, is a sleepy community, a former mill town in the Berkshire Hills. But apparently even Adams – and the Plunkett Hospital, erected in 1918 – can't escape the inexorable condo conversion trend.

"The condo craze is penetrating into Massachusetts," Carver acknowledged.

The news should come as no surprise. Condo converters accounted for 22 percent of apartment sales in 2004, and 45 percent of total volume in January 2005, according to Prudential Real Estate Investors' U.S. Market Outlook for the first quarter of 2005.

The condo market has sizzled in many markets across the country, with condo-price appreciation in some cases exceeding home-price increases. Murmurs of bubbles and busts haven't scared away condo developers from low-rise, high-rise and condo-conversion projects, though. And buyers in some markets are still scrambling to be the first in line for a condo unit.

The former hospital in Adams has two classic red brick New England buildings, one of which boasts a cupola and a 6-foot gold leaf weathervane. It stands on "the best parcel of land in Adams," according to Ronald King, Scarafoni's project manager. Perched high on the hill, the buildings, which total around 40,000 feet, have a striking view of downtown and the surrounding area.

Though the exterior has been preserved, the insides have been gutted, King said. "No remnants of the hospital remain inside," he said. "Hospitals and houses don't have much in common." He acknowledged, "It's somewhat difficult to fit these things into what was a hospital and make it work properly." Overall, the "medium-difficult" job is going well, he said.

Deemed a historic resource by Historic Massachusetts, a state advocate for historical preservation, the hospital sat empty for nearly 20 years. Proposals for the town-owned property went nowhere.

During that period, thieves plundered the boarded-up hospital's copper piping and downspouts. Some even considered the neglected property to be haunted, according to Carver and ghost spotting Web sites that reported, "Screams can be heard along with sightings of ghosts that usually resemble patients that may have died there." Carver, however, said, "If there are ghosts there, they are friendly ghosts."

In 2003, Scarafoni proposed to bring the "haunted" hospital back from the dead, with a plan to create condominiums selling for $150,000 to $250,000, targeting the "empty-nest" market of local retirees.

City officials were ecstatic. "We are quite pleased this is a positive proposal and believe it is a realistic proposal," Faith Yando of the Massachusetts Development Finance Agency, which handled the proposal process, told the local paper, the Berkshire Eagle. "I'm glad it's a local developer and one with a good reputation," Edward Driscoll, vice chairman of the Selectmen, told the Eagle.

Work began in late 2003. Scarafoni expects to complete the job in 2006. The hospital's 200-odd windows have been replaced with windows that, while modern, are mullioned and resemble the old windows. The old gutters and ironwork have been replaced, and now the interior is being rebuilt.

"We are trying to direct this to the older market," said Carver. "A lot of the houses in town are occupied with people who raised their families and now want to downsize.

"This keeps those people in the community and also frees up the larger houses for young couples who plan to have families," Carver said.

The unit mix ranges from a 1,222-square-foot, one-bedroom, one-bath unit with a deck, to a 2,823-square-foot, two-bedroom-plus-den with two baths. All the units have garages. Unlike many condo complexes, the 16-unit property doesn't have a common area.

The condos are priced from $150,000 to $250,000. According to King, new houses in Adams, "which is what these essentially are," sell for around $200,000. The smallest unit is 1,129 square feet, with one bedroom and one bath. The largest is 2,823 square feet, with two bedrooms, a den and a deck.

It appears that Adams residents aren't scared of the hospital's "haunted" reputation, with 11 of the 16 units selling before construction was completed. Indeed, King anticipates that the brick buildings crowning the hill in the center of town will radiate a sense of community.

"Some of the people who are moving in already know each other," King said. "I'm sure it will become a close-knit group."

Tomorrow: First-time buyers get into real estate with condo purchases.